The UK property market has not escaped the effects of what is now a pandemic sweeping across the globe.
The coronavirus is already having an impact on sentiment after it was slowly starting to show signs of improvement.
Following the Conservatives’ decisive election win, confidence in the property market had been riding high. The so-called Boris Bounce had resulted in agents reporting a marked surge of interest among buyers and sellers. Data from Zoopla showed that buyer interest in some parts of the UK in February jumped more than 60% year-on-year, while Halifax has reported a 2% quarterly uptick in house prices.
However, coronavirus fears will undoubtedly cut short this recovery. Capital Economics, the research consultancy, lowered its prediction for house price growth in the UK from 3% to 2% in the past few days. That’s no surprise as buyers and sellers will inevitably delay home viewings until the virus recedes. An increase in quarantine measures could see estate agents as well as solicitors and surveyors to work from home or not at all.
In China, the coronavirus lockdown precipitated a 90% drop in property transactions for three weeks, according to research by Capital Economics. Perhaps a sneak preview of what’s to come for us here in the UK.
The industry will need to step up to combat the difficulties which are unlikely to be alleviated any time soon. Buyers could start shying away from purchases and even signing new rental agreements until the impact of the virus is fully understood.
We know investors are spooked having seen the stock market suffer its biggest one-day fall since 1987 on Thursday 12th March, plummeting 10.9%.
We’ll need innovative measures to keep the market from grinding to a halt, such as agents giving buyers video tours on their smartphones – something I know some agents are already doing.
One area which might receive a boost in the short-term is the purchasing of UK properties by overseas buyers.
Chancellor Rishi Sunak announced they would pay a 2% stamp duty surcharge from April 2021 in his Budget this month.
In the next 12 months, we could well see a flurry of activity to close deals before then.
Meanwhile, the Bank of England cut interest rates to a record low of 0.25% on the same day as the Budget.
Lenders are slowly but surely passing on the cut to their standard variable rates (SVRs), and in the coming weeks, we will see lenders slashing rates on mortgage deals.
I expect we’ll see this more so for purchase mortgages as lenders compete on price to remain competitive due to lack of activity.
When interest rates were last at this level, some banks started offering two-year fixed-rate deals at below 1%. Could five year fixes follow this time?
Watch this space for some seriously cheap mortgage deals.